The German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleisutungsaufsicht – BaFin) has published Circular 04/2016 (GW) – Video Identification Process
Following reactions of market participants, particularly in the Fintech sector, BaFin published on 11 July 2016 a notice on its website stating that the Circular 04/2016 (GW) will be postponed until 31 December 2016 in order to give market participants which are affected by the Circular sufficient time to be prepared for the higher security standards. Until then the Circular 01/2014 (GW) continues to be applicable.
What are the requirements stipulated in Circular 04/2016 (GW) – Video Identification Process?
The new Circular 04/2016 (GW) – Video Identification Process lists the requirements for appropriate video identification of customers which is compliant with anti-money laundering rules and regulations. Under the Circular 04/2016 (GW) – Video Identification Process only credit institutions within the meaning of section 1(1) of the German Banking Act (Kreditwesengesetz – KWG) are entitled to use video identification. The Circular stipulates minimum technical and organisational standards such as:
- video identification must be performed by specially trained employees;
- employees must perform the video identification in a separate room with access control;
- customer’s consent with video identification must be obtained;
- screenshots/photos of the ID documents must be taken which clearly show the relevant information;
- employees must carefully check the security elements on the ID document and verify that the ID documents is properly laminated and undamaged;
- identification process has to be cancelled if the lighting conditions or picture quality/transmission is not adequate or voice communication is not possible;
- the identified person must enter on the online platform a transaction number he or she receives via email or SMS;
- the correctness of the entire video identification process has to be reviewed by a second level within the bank;
- customers are required to perform a reference transaction immediately. This means that customers must transfer funds from an existing account to a new account within a EU member state and which is held on their name;
- public sources (e.g. internet and social networks) have to be checked to verify the identity of the identified person;
- the identification process must be documented and records have to be retained; and
- where video identification is outsourced, the documentation and record keeping requirements have to be complied with by the third-party service provider.
The legislator plans to develop a legal basis for regulatory requirements in relation to customer identification via video to facilitate digitalisation in banking transactions and enhance data security at the same time. It is expected that the legislator evaluates whether video identification will remain limited to credit institutions or eligibility is expanded to other market participants in the financial sector.